Soul Foods Has a $12 Million Bond Issue Outstanding with a Coupon

question 10

Multiple Choice

Soul Foods has a $12 million bond issue outstanding with a coupon rate of 6.75 percent and a yield to maturity of 7.27 percent.What is the present value of the tax shield if the tax rate is 30 percent?

• A)$283,500
• B)$360,000
• C)$3,053,400
• D)$3,560,000
• E)$3,600,000

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Definitions:

Variable Overhead Spending Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on the actual level of production activity.

Standard Variable Overhead Rate

The predetermined rate used to allocate variable manufacturing overhead to individual units of production.

Standard Hours

The predetermined amount of time expected to complete a unit of work or job, serving as a benchmark for productivity and performance measurement.